CEPHEID 
By SUNNYVALE, Calif., Jan. 24, 2013 /PRNewswire/ -- Cepheid (Nasdaq: CPHD) today reported revenue for the fourth quarter of 2012 of $92.4 million. Net income was $5.6 million, or $0.08 per share, which compares to revenue of $80.1 million and net loss of $1.6 million, or $(0.03) per share, in the fourth quarter of 2011. 2011 fourth quarter results reflected a one-time, non-cash charge to cost of sales of $5.4 million, or $0.08 per share, associated with the termination of a patent license.
Excluding stock compensation expenses, impairment of intangible assets and licenses and amortization of acquired intangibles, non-GAAP net income for the fourth quarter of 2012 was $14.2 million, or $0.20 per share. This compares to a non-GAAP net income of $9.4 million, or $0.14 per share, in the fourth quarter of 2011.
Fiscal 2012 Overview
For the year ended December 31, 2012, Cepheid reported revenue of $331.2 million which compares to revenue of $277.6 million in 2011. Net loss for the year was $20.0 million, or $(0.30) per share, which compares to net income of $2.6 million, or $0.04 per share, in 2011. 2012 full year net loss reflected a charge of $15.1 million, or $0.23 per share, associated with a litigation settlement.
Excluding stock compensation expenses, a litigation settlement charge, impairment of intangible assets and licenses, amortization of acquired intangibles and a tax benefit related to an intercompany intellectual property transaction, non-GAAP net income for the year was $21.8 million, or $0.31 per share. This compares to a non-GAAP net income of $29.6 million, or $0.44 per share, for the full year 2011.
"2012 was a challenging year for Cepheid as we worked through growing pains associated with the scale-up of our manufacturing operations and adapted to the incremental variability associated with our HBDC program," said John Bishop, Cepheid's Chief Executive Officer. "Despite these distractions, we were able to grow our clinical test revenue by 32%, including 25% growth in our commercial business."
Continued Bishop, "We are proud of our commitment to innovation, and our investment in R&D continues to be among the most aggressive in the industry. As we move into 2013 and beyond, Cepheid is entering a pivotal period of Xpert test menu expansion with a number of high volume, high value tests that substantially extend our opportunities in new and existing markets. We fully expect this product cycle to drive both market expansion and menu consolidation within accounts thereby benefiting continued, industry-leading revenue growth and improving profitability."
Operational Overview
-- Fourth quarter of 2012 Clinical sales of $82.2 million grew 19% from
$68.9 million in the fourth quarter of 2011, and total fourth quarter of
2012 product sales of $89.7 million grew 17% from the same quarter a
year ago. For the year ended December 31, 2012, total Clinical sales of
$286.3 million grew 21% from $236.0 million reported for 2011.
-- By industry, product sales were, in millions:
Three Months Ended December 31, Full Year Ended December 31,
2012 2011 Change 2012 2011 Change
---- ---- ------ ---- ---- ------
Clinical
Systems $13.4 $19.9 -33% $52.8 $58.6 -10%
Clinical
Reagents 68.8 49.0 40% 233.5 177.4 32%
---- ---- ----- -----
Total
Clinical 82.2 68.9 19% 286.3 236.0 21%
Non-
Clinical 7.5 8.0 -6% 35.2 29.5 19%
Total
Product
Sales $89.7 $76.9 17% $321.5 $265.5 21%
===== ===== ====== ======
-- By geography, product sales were, in millions:
Three Months Ended December 31, Full Year Ended December 31,
2012 2011 Change 2012 2011 Change
---- ---- ------ ---- ---- ------
North America
Clinical $54.4 $46.4 17% $190.0 $167.9 13%
Other 6.0 7.2 -17% 29.0 25.0 16%
--- --- ---- ----
Total North America 60.4 53.6 13% 219.0 192.9 14%
International
Clinical 27.8 22.5 24% 96.3 68.1 41%
Other 1.5 0.8 90% 6.2 4.5 38%
--- --- --- ---
Total International 29.3 23.3 26% 102.5 72.6 41%
Total Product Sales $89.7 $76.9 17% $321.5 $265.5 21%
===== ===== ====== ======
-- During the fourth quarter of 2012, Cepheid placed a total of 153
GeneXpert systems in its commercial Clinical business. Additionally,
the Company placed a total of 68 GeneXpert systems as part of its High
Burden Developing Country (HBDC) program. For the year ended December
31, 2012, Cepheid placed a total of 523 GeneXpert systems in its
commercial Clinical business and an additional 506 GeneXpert systems as
part of its HBDC program. As of December 31, 2012, a cumulative total
of 3,835 GeneXpert systems have been placed worldwide.
-- Cash and cash equivalents were $95.8 million as of December 31, 2012.
-- DSO was 43 days.
Business Outlook
For the fiscal year ending December 31, 2013, the Company expects:
-- Total revenue to be in the range of $375 to $385 million;
-- Net income to range from a net loss of $(0.05) to net income of $0.01
per share;
-- Non-GAAP net income in the range of $0.41 to $0.46 per share.
Expected non-GAAP net income excludes approximately $29 million related to stock compensation expense and approximately $4 million related to the amortization of acquired intangibles. The fully diluted share count for the year is expected to be approximately 72 million, except in the event of a GAAP loss where the share count would be approximately 67 million shares.
The following table reconciles net income (loss) per share to the non-GAAP net income per share range:
Guidance Range
for Year
Ending December
31, 2013
----------------
Low High
--- ----
Net Income (Loss) Per Share $(0.05) $0.01
Stock Compensation Expense 0.40 0.39
Amortization of Purchased
Intangible Assets 0.06 0.06
Non-GAAP Measure of Net Income Per
Share $0.41 $0.46
Accessing Cepheid's Fourth Quarter and Full Year 2012 Results Conference Call
The Company will host a management presentation at 2 p.m. Pacific Time on Thursday, January 24, 2013, to discuss the results. To access the live webcast, please visit Cepheid's website at http://ir.cepheid.com at least 15 minutes before the scheduled start time to download any necessary audio or plug-in software. A replay of the webcast will be available shortly following the call and will remain available for at least 90 days.
About Cepheid
Based in Sunnyvale, Calif., Cepheid (Nasdaq: CPHD) is a leading molecular diagnostics company that is dedicated to improving healthcare by developing, manufacturing, and marketing accurate yet easy-to-use molecular systems and tests. By automating highly complex and time-consuming manual procedures, the Company's solutions deliver a better way for institutions of any size to perform sophisticated genetic testing for organisms and genetic-based diseases. Through its strong molecular biology capabilities, the Company is focusing on those applications where accurate, rapid, and actionable test results are needed most, such as managing infectious diseases and cancer. For more information, visit http://www.cepheid.com.
Use of Non-GAAP Measures
The Company has supplemented its reported GAAP financial information with non-GAAP measures that do not include litigation settlement expenses, employee stock-based compensation expense, a non-cash charge associated with the termination of a patent license, impairment of intangible assets and licenses and amortization of purchased intangible assets. The presentation of this additional information is not meant to be considered in isolation or as a substitute for results prepared in accordance with U.S. GAAP. The Company's management uses the non-GAAP information internally to evaluate its ongoing business, continuing operational performance and cash requirements, and believes these non-GAAP measures are useful to investors as they provide a basis for evaluating the Company's cash requirements and additional insight into the underlying operating results and the Company's ongoing performance in the ordinary course of its operations.
These non-GAAP measures may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP measures have limitations in that they do not reflect all of the amounts associated with its results of operations as determined in accordance with U.S. GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the corresponding GAAP measures.
As described above, the Company excludes the following items from one or more of its non-GAAP measures when applicable:
Litigation Settlement Expenses. These expenses consist primarily of expenses related to the settlement of our previously outstanding litigation with Abaxis. This allocation was determined in accordance with ASC 450, Accounting for Contingencies (formerly SFAS No. 5), and ASC 605-25 (formerly EITF 00-21) using the concepts of fair value based on the past and estimated future revenue streams related to the products covered by the patents previously under dispute. Specifically, the amount recorded in the income statement as Litigation settlement in the year ended December 31, 2012 represents the fair value of the royalty paid on past revenue streams and the residual amount after allocating value to the future revenue streams. The Company excluded this item as it believes it is non-recurring in nature, and does not have a direct impact on the operation of the Company's core business.
Employee Stock-based Compensation Expense. These expenses consist primarily of expenses for employee stock options and employee restricted stock under ASC 718 (formerly SFAS 123(R)). The Company excludes employee stock-based compensation expenses from its non-GAAP measures primarily because they are non-cash expenses that the Company does not believe are reflective of ongoing operating results in the period incurred. Further, as the Company applies ASC 718, it believes that it is useful to investors to understand the impact of the application of ASC 718 on its results of operations.
Impairment of Intangible Assets and Licenses and Amortization of Purchased Intangible Assets. The Company incurs amortization of purchased intangible assets in connection with acquisitions and incurs impairment of intangible assets and licenses. The Company excludes these items because these expenses are not reflective of ongoing operating results in the period incurred. These amounts arise from the Company's prior acquisitions and have no direct correlation to the operation of the Company's business.
Tax Benefit Related to Intercompany Intellectual Property (IP) Transaction. The Company excluded a tax benefit related to an intercompany IP transaction from its results for non-GAAP net loss for the year ended December 31, 2012. The Company excluded this item as it believes it is non-recurring in nature, and does not have a direct impact on the operation of the Company's core business.
Forward-Looking Statements
This press release contains forward-looking statements that are not purely historical regarding Cepheid's or its management's intentions, beliefs, expectations and strategies for the future, including those relating to potential growth, future revenues and future net income/loss and profitability, including on a non-GAAP basis, and test menu expansion. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results could differ materially from the Company's current expectations. Factors that could cause actual results to differ materially include risks and uncertainties such as those relating to: our ability to successfully complete and bring on line additional manufacturing lines; our success in increasing direct sales and the effectiveness of our sales personnel; the performance and market acceptance of new products; sufficient customer demand; our ability to develop new products and complete clinical trials successfully in a timely manner for new products; uncertainties related to the FDA regulatory and European regulatory processes; the level of testing at clinical customer sites, including for Healthcare Associated Infections (HAIs); the Company's ability to successfully introduce and sell products in clinical markets other than HAIs; the rate of environmental biothreat testing conducted by the USPS, which will affect the amount of consumable products sold to the USPS; variability in systems placements and reagent pull-through in the Company's HBDC program and the level of sales through that program; other unforeseen supply, development and manufacturing problems; the potential need for additional intellectual property licenses for tests and other products and the terms of such licenses; lengthy sales cycles in certain markets; the Company's reliance on distributors in some regions to market, sell and support its products; the occurrence of unforeseen expenditures, acquisitions or other transactions; costs associated with litigation; the impact of competitive products and pricing; the Company's ability to manage geographically-dispersed operations; and underlying market conditions worldwide. Readers should also refer to the section entitled "Risk Factors" in Cepheid's Annual Report on Form 10-K, its most recent Quarterly Report on Form 10-Q, and its other reports filed with the Securities and Exchange Commission.
All forward-looking statements and reasons why results might differ included in this release are made as of the date of this press release, based on information currently available to Cepheid, and Cepheid assumes no obligation to update any such forward-looking statement or reasons why results might differ.
FINANCIAL TABLES FOLLOW
CEPHEID
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
December 31, Years Ended
December 31,
------------
2012 2011 2012 2011
---- ---- ---- ----
Revenues:
System
sales $14,101 $20,371 $55,447 $61,948
Reagent
and
disposable
sales 75,557 56,576 266,101 203,576
------ ------ ------- -------
Total
product
sales 89,658 76,947 321,548 265,524
Other
revenues 2,775 3,167 9,664 12,051
Total
revenues 92,433 80,114 331,212 277,575
------ ------ ------- -------
Costs and operating expenses:
Cost
of
product
sales 42,896 38,632 153,365 122,840
Collaboration
profit
sharing 1,416 1,582 7,183 4,863
Research
and
development 17,299 16,650 71,673 59,362
Sales
and
marketing 16,294 14,490 61,907 50,691
General
and
administrative 9,470 10,153 43,298 36,004
Litigation
settlement - - 15,110 -
Total
costs
and
operating
expenses 87,375 81,507 352,536 273,760
------ ------ ------- -------
Income
(loss)
from
operations 5,058 (1,393) (21,324) 3,815
Other
income
(expense),
net 241 (506) (4) (1,143)
--- ---- --- ------
Income
(loss)
before
income
taxes 5,299 (1,899) (21,328) 2,672
Benefit
from
(provision
for)
income
taxes 345 250 1,285 (45)
Net
income
(loss) $5,644 $(1,649) $(20,043) $2,627
====== ======= ======== ======
Basic
net
income
(loss)
per
share $0.09 $(0.03) $(0.30) $0.04
===== ====== ====== =====
Diluted
net
income
(loss)
per
share $0.08 $(0.03) $(0.30) $0.04
===== ====== ====== =====
Shares
used
in
computing
basic
net
income
(loss)
per
share 66,370 64,113 65,812 62,735
====== ====== ====== ======
Shares
used
in
computing
diluted
net
income
(loss)
per
share 68,787 64,113 65,812 66,750
====== ====== ====== ======
CEPHEID
CONDENSED CONSOLIDATED UNAUDITED BALANCE SHEETS
(in thousands)
December 31, December
2012 31, 2011
---- --------
ASSETS
Current assets:
Cash and
cash
equivalents $95,779 $115,008
Accounts
receivable,
net 43,999 35,375
Inventory 70,114 62,239
Prepaid
expenses
and other
current
assets 9,448 5,245
----- -----
Total
current
assets 219,340 217,867
Property
and
equipment,
net 54,830 35,833
Other non-
current
assets 913 730
Intangible
assets,
net 18,767 13,795
Goodwill 37,694 18,445
Total
assets $331,544 $286,670
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts
payable $33,701 $32,167
Accrued
compensation 16,540 17,928
Accrued
royalties 7,992 8,357
Accrued
and other
liabilities 4,235 3,086
Current
portion
of
deferred
revenue 9,599 8,176
Current
portion
of notes
payable 183 -
--- ---
Total
current
liabilities 72,250 69,714
Long-term
portion
of
deferred
revenue 1,156 2,003
Notes
payable,
less
current
portion 1,685 -
Other
liabilities 8,911 3,120
----- -----
Total
liabilities 84,002 74,837
------ ------
Shareholders' equity:
Common
stock 355,867 324,211
Additional
paid-in
capital 117,217 93,144
Accumulated
other
comprehensive
income 56 33
Accumulated
deficit (225,598) (205,555)
-------- --------
Total
shareholders'
equity 247,542 211,833
Total
liabilities
and
shareholders'
equity $331,544 $286,670
======== ========
CEPHEID
CONDENSED CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
------------------------
2012 2011
---- ----
Cash flows from operating activities:
Net income
(loss) $(20,043) $2,627
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation
and
amortization
of property
and
equipment 13,446 10,298
Amortization
of
intangible
assets 4,965 6,523
Amortization
of
terminated
patent
license and
impairment
of acquired
intangible
assets 1,399 5,372
Stock-based
compensation
related to
employees
and
consulting
services
rendered 24,496 19,768
Changes in operating assets and
liabilities:
Accounts
receivable (6,443) (7,830)
Inventory (5,105) (23,982)
Prepaid
expenses and
other
current
assets (2,714) (237)
Other non-
current
assets (172) (122)
Accounts
payable and
other
current
liabilities (5,740) 11,365
Accrued
compensation (1,736) 5,334
Deferred
revenue 575 (2,084)
--- ------
Net cash
provided by
operating
activities 2,928 27,032
Cash flows from investing activities:
Capital
expenditures (23,150) (18,922)
Cash paid for
intangible
asset (2,140) -
Payments for
technology
licenses - (1,655)
Cost of
acquisitions,
net (24,021) (296)
------- ----
Net cash used
in investing
activities (49,311) (20,873)
Cash flows from financing activities:
Net proceeds
from the
issuance of
common
shares and
exercise of
stock
options 27,079 35,857
Proceeds from
notes
payable 156 -
Principal
payment of
notes
payable (72) (6,669)
--- ------
Net cash
provided by
financing
activities 27,163 29,188
Effect of
exchange
rate change
on cash (9) 123
--- ---
Net increase
(decrease)
in cash and
cash
equivalents (19,229) 35,470
Cash and cash
equivalents
at beginning
of period 115,008 79,538
Cash and cash
equivalents
at end of
period $95,779 $115,008
======= ========
CEPHEID
RECONCILIATION OF GAAP TO NON-GAAP MEASURES (UNAUDITED)
(in thousands, except per share data)
Three Months Ended Years Ended
December 31, December 31,
------------ ------------
2012 2011 2012 2011
---- ---- ---- ----
Cost of product sales $42,896 $38,632 $153,365 $122,840
Stock compensation expense (808) (443) (3,037) (1,684)
Impairment of intangible assets and
licenses (1,233) (5,372) (1,233) (5,372)
Amortization of purchased intangible
assets (332) (347) (1,330) (1,383)
---- ---- ------ ------
Non-GAAP measure of cost of product sales $40,523 $32,470 $147,765 $114,401
Gross margin on product sales per GAAP 52% 50% 52% 54%
Gross margin on product sales per Non-GAAP 55% 58% 54% 57%
Operating expenses $43,063 $41,293 $176,878 $146,057
Stock compensation expense (5,756) (4,806) (21,415) (18,084)
Impairment of intangible assets and
licenses (328) - (328) -
Amortization of purchased intangible
assets (376) (107) (1,452) (429)
---- ---- ------ ----
Non-GAAP measure of operating expenses $36,603 $36,380 $153,683 $127,544
Income (loss) from operations $5,058 $(1,393) $(21,324) $3,815
Stock compensation expense 6,564 5,249 24,452 19,768
Amortization of purchased intangible
assets 708 454 2,782 1,812
Impairment of intangible assets and
licenses 1,561 5,372 1,561 5,372
Litigation settlement - - 15,110 -
--- --- ------ ---
Non-GAAP measure of income from operations $13,891 $9,682 $22,581 $30,767
Net income (loss) $5,644 $(1,649) $(20,043) $2,627
Stock compensation expense 6,564 5,249 24,452 19,768
Amortization of purchased intangible
assets 708 454 2,782 1,812
Impairment of intangible assets and
licenses, net of tax 1,288 5,372 1,288 5,372
Litigation settlement - - 15,110 -
Tax benefit related to intercompany IP
transaction - - (1,815) -
--- --- ------ ---
Non-GAAP measure of net income $14,204 $9,426 $21,774 $29,579
Basic net income (loss) per
share $0.09 $(0.03) $(0.30) $0.04
Stock compensation expense 0.09 0.08 0.37 0.32
Amortization of purchased intangible
assets 0.01 0.01 0.04 0.03
Impairment of intangible assets and
licenses, net of tax 0.02 0.09 0.02 0.08
Litigation settlement - - 0.23 -
Tax benefit related to intercompany IP
transaction - - (0.03) -
--- --- ----- ---
Non-GAAP measure of net income per share $0.21 $0.15 $0.33 $0.47
Diluted net income (loss) per
share $0.08 $(0.03) $(0.30) $0.04
Stock compensation expense 0.09 0.08 0.35 0.29
Amortization of purchased intangible
assets 0.01 0.01 0.04 0.03
Impairment of intangible assets and
licenses, net of tax 0.02 0.08 0.02 0.08
Litigation settlement - - 0.23 -
Tax benefit related to intercompany IP
transaction - - (0.03) -
--- --- ----- ---
Non-GAAP measure of net income per share $0.20 $0.14 $0.31 $0.44
Shares used in computing basic net income
(loss) per share 66,370 64,113 65,812 62,735
Shares used in computing diluted net
income (loss) per share 68,787 64,113 65,812 66,750
Impact of dilutive securities in periods
of GAAP net loss and Non-GAAP net income 589 4,480 3,888 878
--- ----- ----- ---
Shares used in computing Non-GAAP diluted
net income per share 69,376 68,593 69,700 67,628
CONTACTS:
For Media Inquiries: For Investor Inquiries:
-------------------- -----------------------
Jared Tipton Jacquie Ross
Cepheid Corporate Communications Cepheid Investor Relations
Tel: (408) 400 8377 Tel: (408) 400 8329
communications@cepheid.com investor.relations@cepheid.com
SOURCE Cepheid
